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Is growth in the financial sector good for the economy?

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Re: Is growth in the financial sector good for the economy?

#31

Post by TeMPOraL »

witty_username wrote: post #25
TeMPOraL wrote: post #24

Earlier quoted context omitted.

On the other hand, such distributed planning is incredibly inefficient - how much resources are wasted by Uber competing with Lyft competing with Taxis, by FedEx competing with UPS competing with post office, etc.? The point is, it's a tradeoff - efficiency with single points of failure vs. resilience at a cost of huge waste.

What resources are wasted? Perhaps some innovative ideas are being duplicated at worst?

Goods are produced that no one needs. The market gets randomly stuck at local minimas that lead, for instance, to throwing away tons of food because it's more profitable to do that than to donate to those in need. You get tons and tons of duplication by companies competing with each other over a limited set of customers, which also feeds the advertising industry that wastes resources on zero sum games. In current model, the economy is regulated implicitly, by feedback loops fighting against each other creating a dynamic equilibrium. It's inherently less efficient than regulating explicitly. My point is that while humans are not capable of regulating on such scale and thus have to rely on implicit methods, optimization algorithms run on real-time data feeds may in fact be able to regulate explicitly.

Re: Is growth in the financial sector good for the economy?

#32

Post by rorykoehler »

TeMPOraL wrote: post #3
CmonDev wrote: post #2

Since it's no longer a Free Market, might as well go with a planned economy - now that supercomputers allow for actual real-time planning.

There never was a Free Market. I second the idea of revisiting central planning with tools capable of doing proper optimization at scale.

I would recommend looking to nature for patterns. Large networks of loosely interdependent organisms work best. Once one species (e.g. humans) become too dominant the whole system begins to fall apart.

There is no central planning in nature. It could be argued that central planning is an unnatural state. A far more robust solution would be to focus on having an economy made up of many small/medium size organizations and individual makers. Currently our economy with our "too big to fail" institutions is very fragile, as single points of failure can have catastrophic global effects. It would be much more healthy to eliminate the possibility of devastating single points of failure.

Re: Is growth in the financial sector good for the economy?

#33

Post by digi_owl »

rorykoehler wrote: post #32
TeMPOraL wrote: post #3

Earlier quoted context omitted.

There never was a Free Market. I second the idea of revisiting central planning with tools capable of doing proper optimization at scale.

I would recommend looking to nature for patterns. Large networks of loosely interdependent organisms work best. Once one species (e.g. humans) become too dominant the whole system begins to fall apart. There is no central planning in nature. It could be argued that central planning is an unnatural state. A far more robust solution would be to focus on having an economy made up of many small/medium size organizations…

I could have sworn the old idea was that factories would shift from working for the executive suite to working for the workers. That is, make the workers the shareholders and board.

Re: Is growth in the financial sector good for the economy?

#34

Post by yummyfajitas »

TeMPOraL wrote: post #31
witty_username wrote: post #25

Earlier quoted context omitted.

What resources are wasted? Perhaps some innovative ideas are being duplicated at worst?

Goods are produced that no one needs. The market gets randomly stuck at local minimas that lead, for instance, to throwing away tons of food because it's more profitable to do that than to donate to those in need. You get tons and tons of duplication by companies competing with each other over a limited set of customers, which also feeds the advertising industry that wastes resources on zero sum games. In current mod…

Getting stuck in local minima happens in centrally planned systems too.

You are correct that things like advertising are (sometimes) zero sum - specifically, advertising based on irrational criteria. (Advertising which transmits useful information, e.g. "taxis suck and Uber exists", is not zero sum.)

But you also gloss over one of the big benefits of a non-centralized system - correctly finding the utility function. In a centrally planned system, your utility function needs to properly identify what tradeoffs people would make if they had the choice. This is not easy, and modern computing doesn't help very much here.

In contrast, consumer choice via price systems handles this nicely.

Re: Is growth in the financial sector good for the economy?

#35

Post by pdkl95 »

TeMPOraL wrote: post #6
jevgeni wrote: post #5

Earlier quoted context omitted.

I don't think it ever was a question of tools, but rather who is allowed to use those tools.

I think it actually was. Central planning is a Bad Thing because Soviets did it and it went bad, so nowadays its inferiority is treated as an axiom. But back then optimization theory was just starting to develop and was never actually applied in practice, and we didn't have enough computing power, nor instant communication infrastructure. I think we should revisit the concept of central planning with algorithms doing…

I've never understood why anybody would think that central planning would ever work. The very idea is total hubris - before you even get to the decision making process, you need accurate data to work from. It should be painfully obvious that data about (and especially provided by) humans is at best an approximate representation of reality. Often, it is completely wrong. Real-time noise is still noise.

If you want proof of this, consider why work-to-rule[1] works. While it is obviously intended to be used as a type of strike or similar direct action, the idea is that you are technically doing you job too accurately. The work continues to function thanks to the fact that almost nobody does everything they are technically supposed to do. We speed on the way to work, we overlook minor mistakes, we fix instructions and reinterpret orders. Reports are regularly sent up the chain of command that "yes, project $FOO was finished on time" even though everybody involved knows it wasn't.

The idea that you can take known-bad data, apply it to a fantastically complex model, iterate that model to add unknown amounts of chaotic noise, and get usable results is completely insane. Given the realities of how bureaucracies work, that noise will simply be re-interpreted until it says whatever the people involved want it to say. In the end, it is still a situation where the people making decisions are distanced from the consequences of their decisions.

If you want to fix some of the problems we have, I suggest that we need a lot more of the opposite of central planning: local decision making authority. A control system tends to work better when it can get accurate and immediate feedback, and in human terms that means experiencing - or at least directly seeing - the consequences of any decision. We, as a species, are notoriously terrible at evaluating any decision where the consequences are not felt immediately and personally.

[1] http://libcom.org/organise/work-to-rule

Re: Is growth in the financial sector good for the economy?

#36

Post by sillygeese »

fennecfoxen wrote: post #17
danieltillett wrote: post #10

Earlier quoted context omitted.

This is actually an interesting hypothesis - has computing advanced enough to make central planning possible. I am not sure how you would test it though.

The biggest problems with central planning were never quite as much about the lack of computing power, but more about the incentives that go with that power structure. Politically, the central planner gets to reward all his friends and punish his enemies and deprive them of resources and opportunities. Even aside from the obvious implications on political liberty, getting the opportunity to do business in that enviro…

Then there's the fact that no one can know what any given person wants to buy at a given time, and therefore central planning is doomed to failure because you can't centrally plan "the right" prices for everything, and then you'll end up vastly misallocating resources, and there will be widespread destitution ala Soviet Union.

In conclusion, central planning ultimately just completely fucks up any economy. Check out Venezuela for a recent example.

So if 100% central planning results in a total catastrophe, then there should be no central planning at all, because any extent of central planning is harmful compared to less (or ultimately none at all).

Re: Is growth in the financial sector good for the economy?

#37

Post by rorykoehler »

digi_owl wrote: post #33
rorykoehler wrote: post #32

Earlier quoted context omitted.

I would recommend looking to nature for patterns. Large networks of loosely interdependent organisms work best. Once one species (e.g. humans) become too dominant the whole system begins to fall apart. There is no central planning in nature. It could be argued that central planning is an unnatural state. A far more robust solution would be to focus on having an economy made up of many small/medium size organizations…

I could have sworn the old idea was that factories would shift from working for the executive suite to working for the workers. That is, make the workers the shareholders and board.

That idea (at least in the form you mention) becomes redundant when the factories are full of robots.

Re: Is growth in the financial sector good for the economy?

#38

Post by TeMPOraL »

VLM wrote: post #16
arethuza wrote: post #8

Earlier quoted context omitted.

Large corporations typically implement a form of central planning - that's what applications such as Oracle Hyperion and IBM Cognos are for - managing complex multidimensional models that integrate actual historical values with multiple forecast scenarios.

Another valid analogy with large corporations is if central planning was the optimum strategy, then extreme micromanagement from the top would be the optimum business strategy. Surely it would take top level supercomputers and programmers to run an entire country, but any random MBA with an Excel spreadsheet could run a business more successfully than a business without TPS reports and content-free numbers. So observ…

I think that any large business is already too large for the top to micromanage things. No human has enough time and free computing power in their head to do that. That's why I believe central planning run by humans is unworkable - we're too slow to handle the complexity.

But then again, successful micromanagement happens - it's usually called "strong leadership", "CEO with vision", etc. Apple with Jobs and Amazon with Bezos come to mind as past examples (not sure how Amazon is doing now, but there was a lot of praise written for Jeff's micromanagement), and the most visible current one would be Tesla and SpaceX under Elon Musk.

Re: Is growth in the financial sector good for the economy?

#39

Post by TeMPOraL »

rorykoehler wrote: post #32
TeMPOraL wrote: post #3

Earlier quoted context omitted.

There never was a Free Market. I second the idea of revisiting central planning with tools capable of doing proper optimization at scale.

I would recommend looking to nature for patterns. Large networks of loosely interdependent organisms work best. Once one species (e.g. humans) become too dominant the whole system begins to fall apart. There is no central planning in nature. It could be argued that central planning is an unnatural state. A far more robust solution would be to focus on having an economy made up of many small/medium size organizations…

I'm not sure about appeal to nature here; biology seems rather centralized in a lot of aspects. An organism may be made of many cells, but each of those cells have a specific function. Kidney cells do not compute, and brain cells do not contract to pump blood. When a cell starts doing whatever is best for it locally, we call that "cancer". Centralized management arises naturally whenever there's a need for efficiency. So while there's a lot of distribution going on, I wouldn't say centralization is unnatural. It seems common enough on many different scales.

Re: Is growth in the financial sector good for the economy?

#40

Post by rorykoehler »

TeMPOraL wrote: post #39
rorykoehler wrote: post #32

Earlier quoted context omitted.

I would recommend looking to nature for patterns. Large networks of loosely interdependent organisms work best. Once one species (e.g. humans) become too dominant the whole system begins to fall apart. There is no central planning in nature. It could be argued that central planning is an unnatural state. A far more robust solution would be to focus on having an economy made up of many small/medium size organizations…

I'm not sure about appeal to nature here; biology seems rather centralized in a lot of aspects. An organism may be made of many cells, but each of those cells have a specific function. Kidney cells do not compute, and brain cells do not contract to pump blood. When a cell starts doing whatever is best for it locally, we call that "cancer". Centralized management arises naturally whenever there's a need for efficiency…

The body as you have described it is one node (an organization in my example) in the wider network. For that node to function it needs to have all of its components working in unison but if the node fails other nodes can adapt and the system keeps on chugging.
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